Contract Provisions and the Importance of Negotiation

By: Jill Miller, RSPA General Counsel

I have had many clients throughout my career request that I look at a contract AFTER it is executed.  While I can appreciate that individuals are eager to get out there and sell; still, I can’t stress enough how important it is to take the time to be sure that you go into each new relationship with open eyes. Set forth below are some material provisions that you should pay particular attention to:

  • Services.  This one seems obvious, but I review dozens of contracts that fail to describe precisely what the parties will be providing to one another under the agreement. Take the time to be sure each party’s obligations are well defined. It is much easier to have this discussion before you execute the agreement, as opposed to afterward when someone drops the ball.
  • Commissions.  I take the position that as long as your partner is getting paid, you should get paid. You should have the right to receive reporting so that you can reconcile the amounts you are entitled to receive under the agreement. If there is a period in which you have the right to dispute underpayments, your partner should also be limited to the same time period to claw back overpayments.
  • Fees.  There should be few reasons that a price increase should occur during the initial term of an agreement. If price increases are mandatory, I would suggest they be limited only to third-party fees imposed upon your partner and passed through to you without any markup.
  • Non-Solicitation.  This provision can be drafted very broadly, and it is critical that you read it carefully. I would only agree not to solicit the customers you bring to your partner and not all of their customers. In addition, I would only agree to a reasonable period; longer non-solicitation periods are only appropriate in a sale transaction. 

Preparing a contract checklist is a good way to be sure you think about contract provisions and their importance to your business. You can start your checklist with these four items, but you should expand it as you acquire additional contract experience along your business journey. As always, if you have any legal questions, the RSPA legal benefit is available to members, and I would be delighted to assist. Stay safe.